I take readers behind Wall Street's velvet rope. I have a backstage pass. In 1982 I ran a small hedge fund from the Floor of the CBOE. As a market-maker I learned that money moves markets, but psychology moves money. I was part of the crew using options premiums on OEX puts and calls to calculate market volatility, which later became known as the VIX. I wanted to trade big money, so I got myself hired to run the futures and options division of Lloyd's Bank, one of Britain's largest. I can tell you how banks really operate. After running trading desks on Wall Street I started another hedge fund in 1999. We traded proprietary black-box algorithms, many of which I designed, through a brokerage operation I started to secure direct access to the exchanges. Besides writing, I'm a partner in a private equity shop and back in the hedge fund game, trading FX.

Why The Man Who Should Run The Federal Reserve Never Will

There is a magnificent game going on, it’s run by the Federal Reserve.

In The Game, there are always two winners: the banks and the federal government.

To run the game the Fed needs a strong chairman who knows their secret playbook.

The best man for our country, the man who should be offered the top job at the Fed because he’s smart, honest and because he would stop the damaging games that are ruining America, hasn’t a snowball’s chance in Hell of ever being considered.

Why? Because he just wrote a book about the mess we’re in and exposes the Fed’s game.

Before I tell you who he is, and the title of his new book, which is frighteningly accurate about how America got to where it is today and where it’s headed, I will excerpt sparingly from only two pages of the over 700 page book to illuminate something.

Here, from the man who should be the next Fed chairman, is how The Game is played.

“The national debt of $1.2 billion had exploded to $260 billion by the end of the Second World War, and rather than 3 percent of GDP it was now 125 percent. The federal government could never have accumulated debts of this magnitude without a central bank to serve as its fiscal agent and buyer of last resort.”

“The Fed thus became ensconced at the heart of the government debt market, where its operations consisted first and foremost of buying Treasury securities from Wall Street dealers to prop-up the market for government debt.”

“The Fed’s crucial wartime learning experience came from its efforts to make it worthwhile for its wards in the banking system to hold all this government paper. To this end it capped the discount rate at 1 percent, thereby keeping deposit costs cheap for the duration of the war. At the same time, the banks earned a 2.5 percent coupon from their investments in long-term Treasury bonds.”

“What really happened is that the Fed discovered the secret of how to manufacture bank profits by rigging the Treasury yield curve so it sloped in a smartly upward direction. Once discovered, this monetary sorcerer’s trick remained a staple in the Fed’s playbook thereafter.”

“Under its (the Fed’s) original mission, banks needing cash would bring their eligible loan collateral to the Fed’s discount window to obtain a short-term advance. Accordingly the commercial banking system was the active agent which drew the Fed’s cash into the economy based on the actual pace of local business activity.”

“That is the inverse of today’s model in which the Fed proactively injects cash into the system through open market operations based on where its monetary central planners think the national and world economy ought to be.”

“The Federal Reserve became a powerful, proactive manager and manipulator of the nation’s entire commercial banking system. These very same tools (managing the nation’s ballooning war debt) of banking system management through manipulation of the yield curve were later adapted to management of the GDP itself.”

“Its apotheosis came six decades later, when the Fed orchestrated a veritable dance of the zombies during the aftermath of the September 2008 meltdown. Reaching back to its school days in war finance, the Fed again engineered a steep Treasury yield curve by driving front-end rates to nearly zero.”

“In so doing, it gifted legions of insolvent banks with a simulacrum of profits. It thereby reduced depositors to penury, of course, even if it kept zombie institutions alive and their executives in bonuses for a while longer.”

The man who should be the next Federal Reserve chairman is David A. Stockman.

Stockman’s new bestselling book, The Great Deformation, is a monumental work that illuminates history, lays bare the truth of where we are today, and as a blueprint for the future tells us how to untangle the corrupt strands of capitalism that deforms our nation.

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